There could soon be just two heavyweights left to slug it out in India’s web-based grocery market: Bigbasket and Amazon. Recently, Mint reported that web-based grocer, Bigbasket, was in acquisition talks with its smaller rival Grofers. This isn’t the first time such reports have emerged. The Economic Times reported so in January.
It is entirely possible that all of this is conjecture but if it does go through, it marks an end to the biggest rivalry in the Indian e-grocery market. And the start of a new one between Bigbasket and Amazon.
The Bigbasket-Grofers rivalry is a pale imitation of another one being fought on similar grounds. Between Instacart and FreshDirect. One on the West coast, the other on the East coast. Both have one agenda: we will shop for you, so you don’t have to. Instacart, founded in 2012, is now valued at $3.4 billion. FreshDirect, founded in 1999, claims it is profitable and just raised over $180 million in funding with a possible eye on an IPO. Their biggest competitor is Amazon.
Investors and entrepreneurs in India saw a similar opportunity. And thus began a spate of companies in India. Two of them were Bigbasket and Grofers. The former followed the FreshDirect model, and the latter, for a while, Instacart. These two also compete with Amazon.
One holds inventory, the other relied on the marketplace model. Essentially, the two models of e-commerce. Investments rained in. Grofers got cash from SoftBank, Bigbasket raised money from The Abraaj Group. And both promised convenience.
According to Tracxn, the sector raised a whooping $282 million in 2015 with over 380 companies created in that time frame just to assist you with your shopping. In 2016, funding started to dry up and just over $160 million was raised. A few companies shut down too: LocalBanya in 2015 and PepperTap in 2016. LocalBanya copied the FreshDirect model, and PepperTap aped Instacart. Cash in both companies had dried up. Interest faded and they flickered away. But Bigbasket and Grofers continue to plow in more money to make this sector and their business work. There’s a reason why. The retail sector is set to be valued at $1.2* trillion by 2020. There’s a lot to be excited about.
But Grofers pivoted away from the marketplace model of hyperlocal delivery to inventory. The model, however, still exists in the US. And it still holds a big draw in India. In fact, Flipkart may be making a comeback in groceries. Grofers lost the battle of the market share and the battle of the business model.